KUALA LUMPUR, Dec 7: BCB Bhd, which aims to sell RM400 million worth of properties in the current financial year ending June 30, 2016 (FY16), is optimistic that the weakening of the ringgit and softening property market will not affect its business significantly.
BCB group managing director Datuk Tan Seng Leong said the softening in the property market has been especially noticeable in the second half of this year and may last until the first half of next year, with a lot of construction work slowing down, leading to oversupply of building materials.
“Building materials, especially M&E (mechanical and electrical) parts need to be imported from overseas, especially China. With the ringgit down, prices have gone up. For this, we’re concerned. But the good thing is steel bar prices have come down because of an oversupply,” he told SunBiz in an interview recently.
BCB’s principal activities include property development, real estate management, hotel management, project management, road construction, manufacturing of concrete products and trading of building materials.
Tan said the group is fortunate that it awarded its contracts for ongoing projects much earlier and some projects have been completed and therefore it has not felt the brunt of the weaker ringgit.
“For the new projects, we’re cautious but steel bar prices have gone down, which is an advantage,” said Tan, who is also a vice-president of the Associated Chinese Chambers of Commerce and Industry of Malaysia.
BCB is upbeat that its projects in the Klang Valley as well as existing ones in Johor will contribute positively to its earnings. Tan explained that secondary towns such are seeing good growth, citing Batu Pahat as an example.
“Batu Pahat is an industrial-based town and a vibrant secondary town. It is not much affected by this crisis but has benefited from it. Industrial-based areas are export-orientated. Those exports benefit a lot from the exchange rate (weaker ringgit),” he said.
Batu Pahat contributes about RM100 million to sales of the group.
Tan said BCB has achieved sales of RM180 million so far, in line with its target to sell RM400 million worth of properties in FY16. Sales stood at RM400 million in FY15. “It (RM400 million in FY16) is a conservative target because the (property) market, especially for the second half of this year and the first half of next year, is soft for all developers, and buyers are cautious.”
For FY16, the group will launch the second phase of HomeTree in Kota Kemuning next year. It launched the Elysia Park Residence in Medini, Johor, in August.
Tan, who is known as the “father of Kluang” for his key role in the town’s significant growth, said BCB plans to move its headquarters to either Kuala Lumpur or Johor Baru in the next two to three years, as 90% of its projects are out of Kluang now.
“In fact, in Klang Valley we have successfully launched two projects (Concerto North Kiara in Dutamas and HomeTree in Kota Kemuning) and received awards. This will give us better encouragement.”
BCB has a landbank of 800 acres in Batu Pahat, Johor Baru, Kluang and Klang Valley that can last the group between eight and 10 years.
“We’ll acquire (landbank) but what’s important is the point of entry. Most of my landbank’s point of entry is low. In every cycle, there is opportunity for us to buy cheaper pieces of land. For developers, whether we can survive during the crisis (boils down to) the point of entry. If the point of entry is too high, it is dangerous,” explained Tan.
“In every project that we do, we think of security, comfort, innovation and quality.”